FCC saves Charter from threat of having to compete for customers

Pai slices away 'overbuild' condition on Time Warner Cable gobble

US comms watchdog the FCC has voted to eliminate a key provision in Charter Communications's merger deal with Time Warner Cable that required it to expand into new markets.

The commission on Monday revoked the 'overbuild' clause in the 2016 approval deal for the $78.7bn merger that brought both TWC and Bright House Networks under the Charter banner.

Part of the original deal included the requirement that Charter expand its newly merged cable service into markets it had not previously served. Known as an 'overbuild' clause, it would force Charter to offer cable to at least two million households it had not covered before, one million of which would be in areas where at least one provider is already operating, adding competition to areas deemed "underserved."

While Charter had agreed to the condition to get the merger through, cable industry groups have come out against the provision, arguing that it unfairly forces smaller local carriers to have to compete with the largest cable provider in the country, while also keeping Charter from improving its existing service in other areas.

The American Cable Association, whose backers include Comcast and Viacom, leads the charge, filing a letter [PDF] asking the commission to yank the overbuild requirement.

"The threat of government-mandated, uneconomic entry undermines the incentive for smaller operators to invest in expanding their networks to bring new and better broadband services to unserved or underserved populations," the group argued.

"The overbuild requirement also means that Charter must expend resources to provide a second option to subscribers who already have service of 25 Mbps or faster. That will divert scarce resources from efforts to reach consumers without any broadband (or who lack access to speeds of 25 Mbps, a category that includes many current Charter subscribers)."

That argument found a welcome audience with the FCC's more conservative commissioners, including newly minted chairman Ajit Pai, who has embarked on a crusade to make the FCC do as little as possible in regard to oversight and enforcement of communications companies.

"The last thing we want to do is penalize you for the investments you've already made and dis-incentivize you from doing it in the future," Pai told the ACA last week at its annual summit.